NCLT hears SBI’s charge on Electrosteel Steels

The bench here of the National Law Company Tribunal heard the State Bank of India (SBI) plea for insolvency proceedings against Electrosteel Steels.

Sources said the order on whether to admit the plea was awaited. "They have heard the case."

Last month, the lenders led by SBI of Electrosteel had gone to the NCLT for further action under the Insolvency and Bankruptcy Code (IBC). This was among the 12 cases identified by the Reserve Bank of India as the first lot to be referred to NCLT under the IBC.

A resolution plan for the company was, at the time, already being discussed with the lenders. The company had proposed to bring new equity, from Abhishek Dalmia of the Renaissance group and infusion of another ~1,500 crore as a loan from Edelweiss. This and any other proposal that might come up would be discussed at the NCLT.

Electrosteel’s debt at the end of 2015-16 was ~10,274 crore. To resolve its inability to pay, the lenders had first applied the strategic debt restructuring (SDR) rule. This procedure had been introduced by RBI to tackle the issue of burgeoning debt by allowing banks to acquire control of a defaulting company, by converting loans into equity. Then, they were to bring in new promoters, after which sticky assets were to be upgraded to standard ones.

First International Group had emerged as the shortlisted bidder but the deal fell through. A series of negotiations with other companies followed. Finally, the proposal of Dalmia and Edelweiss was being discussed, when an internal committee of RBI recommended the IBC reference for all accounts debt exceeding ~5,000 crore and 60 per cent or more classified as nonperforming by banks as of end-March 2016.